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7 Deadly Investment Sins

7 Deadly Investment Sins

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Published by qualityresearch
Tips on what not to do in investing.
Tips on what not to do in investing.

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Published by: qualityresearch on Apr 07, 2009
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06/23/2010

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Seven Deadly Investment Sins:
 How to SaveYour Portolio. Now.
 
1
After nearly 30 years of providing world-class investment research, and nearly 15 years of portfo-
lio management experience, Zacks has identied “7 Deadly Investment Sins” that have plaguedso many investors. At some point everyone has been guilty of at least one of these “sins” and if allowed to continue, it can destroy your portfolio.The good news is that I have identied these “sins” for you in this special report. On the follow
-
ing pages I provide a detailed analysis of these “sins” and explain why they are so deadly to a
portfolio.
It is a great pleasure to share the results of my analysis with you in the hope you will be able toavoid these pitfalls in the future. I am condent that avoiding these “sins” will help you make your 
investment goals become realities.-Mitch Zacks
Seven Deadly Investment Sins:How to Save Your Portolio. Now.Contents:
s........................................................ 1
g................................................................. 2
s.................................................. 3
n................................................... 5
e................................... 6
s
........................................... 7Sin #6: Chasing Return
s............................................................ 8
n............................................................. 10
s..................................................................................... 11
 
“I’m going to wait until market conditions improve beore I invest…” 
 
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Market timing is a strategy where an investor attempts to predict the future direction of the marketand then move in and out of the market accordingly. This is one of the most dangerous strategiesANY investor can employ.There are essentially two reasons why market timing is so dangerous:Over the short term, the market does not always move logically or predictably. This makes
1.
it nearly impossible to time the market. Simply put, it can’t be done.Even if you were able to beat the odds and create a system that accurately times the mar 
-2.
ket, the payoff would not be worth taking that level of risk.Investors who attempt to time the market are at risk of missing periods of exceptional returns. This
can have a large negative impact on an otherwise well planned investment strategy.
Suppose for a moment your timing strategy was slightly off and you missed out on just 30 days of strong performance each year. The result would be disastrous to your overall return. The graphbelow illustrates the effect of missing the one best month in a calendar year for the period of 1995- 2007.We should note that although we feel timing the market is an impossible strategy, we have proventhat there are inefciencies in the market that allows investors to accurately identify individualstocks that are poised to outperform (or underperform) the overall market. After years of quantita
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tive research, Zacks has discovered that the most reliable and accurate predictor of future stock
price movement are earnings estimate revisions.
Sin #1: Market Timing

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